Giant details plans to stay on top in China

SHANGHAI, China—If any bike brand could be expected to lead the charge into China’s emerging midrange to high-end market, it would be Giant.

The Taiwanese manufacturer was one of the first to expand its business to the mainland in 1992 with a factory and Chinese headquarters in Kunshan—an industrial city about 60 kilometers west of Shanghai that’s also home to a Shimano factory and Foxconn, Apple’s contract manufacturer for millions of exported iProducts.

Giant now runs eight factories in China producing bikes and e-bikes, and a recent $36 million factory expansion in Kunshan made way for an additional capacity of 1.5 million units for the domestic and export market. Last year, Giant sold 1.87 million bikes in China, said Kevin Zhu, general manager for domestic marketing in China. That represents a market share of about 6.75 percent.

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The brand already seems omnipresent in China with 2,465 shops scattered throughout the country, but Zhu wants to make sure it maintains its perch as premium bike brands from North America and Europe start competing for a slice of China’s high-end potential.
Under an aggressive plan dubbed G2015, Giant plans to grow to 4,000 shops in China in the next three years and reposition itself as the top choice for shoppers seeking exclusive brands. Zhu projects sales of 4.5 to 5 million bikes annually by 2015.

But that involves a significant shift in consumer perception.

Of the 1.87 million bikes Giant sold in China last year, Zhu said about 30 to 40 percent retailed above 2,000 yuan ($320). Meanwhile, the company sold just 100 bikes for 50,000 yuan ($7,940) or more.

While brands like Giant and Merida have been the big winners in the middle of the category—basic commuter-style bikes priced at 500 to 2,000 yuan ($80 to $320)— it makes it that much more challenging to convince consumers that they should turn to those same brands for a $10,000 flashy road bike. Shoppers with that kind of money are looking for cachet and exclusivity and a name on the downtube that you won’t also find parked outside a metro station lost in a rack of hundreds of beat-up transportation bikes.

Zhu sees Giant’s proliferation as a benefit, not a drawback. First, it’s easy to access because there are stores everywhere, and customers will look to Giant to bring them the latest international trends. With roots that span two decades in China, the brand is trusted, and has already worked through many of the challenges that newcomers to China will just be facing for the first time

“We will not be facing pressure from better high-end products because we are the high-end brand,” Zhu said speaking through a translator. “We are leading the industry.”

As part of Giant’s retail plan in China, it will modify or eliminate some of its existing shops to make way for more professional stores. It plans to build 100 top-level stores—modeled after Apple—that sell products priced at 2,000 yuan or above. The stores will be bright, comfortable and well merchandised, more like concept stores seen in the West, with Giant-trained sales and service staff. The first shop of its kind, which is owned by Giant, opened last month in Nanjing, the second-largest city in Eastern China, behind only Shanghai.

Giant is also marketing a brand called Momentum specifically to the Chinese and Taiwanese markets to help differentiate mobility bikes from the Giant-branded recreational bikes. Momentum is positioned at the middle of the market, that 500 to 2,000 yuan sweet spot, strictly for commuters.

The long-term plan is to have Momentum carry itself with its own stores, but for now Giant shops will stock both the company’s namesake brand and Momentum. Since Momentum launched two years ago, Giant has sold about 400,000 units, Zhu said.